November 9, 2013

Tesla Shares Smolder As Third Car Ignites In Flames

Tesla Motors is reporting a third Model S electric car has caught fire in the past six weeks, which may be smoldering the company's market shares. The incident has also sparked a formal investigation by US safety regulators.

The most recent fire was in a Tesla Model S electric car that caught fire after a highway accident on Interstate 24 in Smyrna, Tennessee on Wednesday. A highway patrolman said the car ran over a tow hitch, which hit the undercarriage of the car. Reuters reports the highway patrol dispatcher called the damage to the car "extensive."

"The Model S undercarriage has armor plating that protects a battery pack of lithium-ion cells. Tesla said it did not yet know whether the fire involved the car's battery," according to a Reuters report.

This is the third incident where a Tesla Model S caught fire after an accident. The first such incident occurred on October 1 outside of Seattle. That accident was caused when the car hit metal debris on the road, which punched a hole through the protective armor plating that protects the lithium-ion battery pack.

The National Highway Traffic Safety Administration ruled that the fire was not due to a vehicle defect.

The second fire occurred in October in Merida, Mexico. Reuters reports the car drove through a roundabout and crashed through a concrete wall and hit a tree.

The three accidents involving Tesla Model S cars igniting on fire have caused stock prices for Tesla Motors to decline, USA Today reports. The paper reports that Tesla shares fell the third consecutive day, closing at $139.91, down $11.25 or 7.4 percent from the previous day's close.

Investor advisors are warning that Tesla needs to resolve its problems quickly in order to restore customer confidence, said a report from EarningForecast.com. The company did report that the Tesla Motors' revenue increased 9 percent last quarter.

"For a company with a stock price based as much or more in image than financials, those recurring headlines are highly damaging," BBC News quoted Karl Brauer, a senior analyst with Kelley Blue Book as saying.

Tesla Motors is taking action to learn more about the cause of the fires in its Model S cars. "Our team is on its way to Tennessee to learn more about what happened in the accident," Tesla spokeswoman Elizabeth Jarvis-Shean said in a corporate statement. "We will provide more information when we are able to do so."

Tesla Motors CEO and product architect Elon Musk addressed the first Model S fire on the Tesla Motors blog, however he has remained quiet since. In his post regarding the first incident, Musk said the fire occurred in the front battery module, one of 16 modules, and was contained in the front section of the car by internal firewalls within the battery pack.

"It is important to note that the fire in the battery was contained to a small section near the front by the internal firewalls built into the pack structure. At no point did fire enter the passenger compartment," Musk wrote in his post.

The post also includes an email correspondence with the Model S owner. The note addresses the accident, and the fire. "I guess you can test for everything, but some other celestial bullet comes along and challenges your design," it said.

It seems that three celestial bullets have been fired in the past six weeks.